Federal Reserve's Daly: Three Rate Cuts This Year Is a Reasonable Baseline Scenario
Fed Chair Powell stated that three interest rate cuts by the Fed this year are a “reasonable baseline” expectation. In his prepared remarks, he emphasized two opposing risks that policymakers need to consider: on one hand, the slowing progress in lowering inflation, and on the other, the sudden sharp deterioration in the labor market. Powell stated that accomplishing this task requires perseverance, resisting the temptation to act quickly when patience is needed, and being prepared to respond flexibly as the economy evolves.
Powell believes that price stability is within reach, but there is still more work to be done. He also discussed various factors that could impede further progress in lowering inflation. He noted that labor force growth and productivity may not grow as strongly as before, and consumer demand may not slow down as expected. Persistent economic momentum exceeding existing supply still poses risks to the inflation outlook.
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